Intesa to decide on next AT1 call based on market conditions-CEO

Illustration shows Intesa Sanpaolo Bank logo
Intesa Sanpaolo Bank logo is seen in this illustration taken March 12, 2023. REUTERS/Dado Ruvic/Illustration

MILAN, March 28 (Reuters) - Intesa Sanpaolo (ISP.MI) will decide based on market conditions whether to repay a perpetual bond with a call option coming due early next year, the chief executive said, adding the potential decision to call did not pose a problem to Italy's biggest bank.

"We'll see what the conditions are," CEO Carlo Messina said on the sideline of an event in Milan when asked if Intesa planned to exercise the call option coming due next on one of its Additional Tier 1 bonds.

"Certainly for us this is not a problem of any kind," he added.

Intesa has a 750 million euro 6.25% perpetual bond with a call option falling due on May 16, 2024.

AT1 bonds have been rattled by turmoil in the banking sector, which has prompted investors to doubt whether lenders will stick to the standard market practice of calling these perpetual bonds at the earliest opportunity.

Unless a bank has very ample capital and liquidity buffers, regulators normally expect lenders to replace such capital instruments with new issues if they repay them, but that would be difficult and excessively costly in current markets.

AT1 bonds are the riskiest type of debt banks can issue, ranking immediately after equity in the event of losses - a hierarchy that was overturned in the recent Credit Suisse (CSGN.S) rescue deal.

Sources told Reuters last week UniCredit (CRDI.MI) has put in a request with European Central Bank supervisors to repay a 1.25 billion euro 6.625% perpetual bond on June 3, the first chance it has to redeem it. ($1 = 0.9234 euros)

Reporting by Gianluca Semeraro; editing by Valentina Za

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